Founder/CEO of Narvar. Amit has decades of experience across supply chain, information technology and business analytics.
After more than 18 months of pandemic-limited travel and social activities, shoppers set spending records in the fourth quarter of 2021, and despite sustained inflation and shipping delays, retailers are looking for ways to maintain that momentum in 2022. Here are my predictions for the year ahead and recommendations for how companies can approach the evolving retail landscape.
1. Supply chain issues and inflation will continue.
Both Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell have warned that we will likely see supply chain issues and inflation into mid-2022.
Over the summer, the Covid-19 Delta variant impacted factory operations in Vietnam, Malaysia and Thailand, which produce the majority of garments, shoes and toys for the U.S. Panos Kouvelis, director of The Boeing Center for Supply Chain Innovation at Washington University in St. Louis, notes that production has ramped back up, but those goods would not reach the U.S. until after the holidays.
With the introduction of the Omicron variant, however, it’s possible that factories will be forced to slow down production again. On top of that, there are two weeks of planned factory and port shutdowns in China in February for the Lunar New Year, which will also throttle the supply chain.
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ByCollectively, these supply chain issues lead to shortages, delays and inflation, which tend to make shoppers more irritable. For retailers, the best strategy is to get ahead of the problem with communication. On e-commerce websites, that could mean clearly indicating the date when a product is expected to be available and proactively emailing preorder customers with updated timelines if the shipment encounters further delays. Within brick-and-mortar operations, retailers should be educating sales staff to ensure they’re able to set reasonable expectations with customers about when items will be available. Consider also posting signage or using QR codes as a way to direct customers to digital inventory records or join a waitlist for back-ordered or out-of-stock items.
2. "Buy online, pick up in store" will become a larger share of the market.
While e-commerce continued to thrive in 2021, customers conditioned to one- to three-day delivery windows found themselves waiting weeks or even months for their orders. Most multi-month delays were for household items like furniture or appliances, but concerns about shipping eventually trickled down to small consumer goods.
The antidote to shipping worries? Buy online, pick up in store programs, also known as BOPIS or click and collect. This offering combines the convenience of e-commerce with the immediacy of in-store shopping, giving consumers peace of mind that the inventory will be in their hands in a timely manner.
Business Insider Intelligence reported that shoppers spent $72.46 billion via BOPIS in 2020, a 106.9% growth rate over 2019, and 9.1% of all retail sales. In 2021, those figures were expected to increase to $83.47 billion and 9.9%.
According to Authorize.net, BOPIS benefits businesses in two major ways: It eliminates third-party carriers from the transaction, allowing retailers to create an end-to-end experience for shoppers, and it increases profits by cutting out expensive shipping costs.
Plus, customers have been quick to adopt BOPIS. Among online shoppers, 15.5% said it was their preferred way of shopping in July 2020, up from 10.8% in March 2020.
Retailers cannot afford to delay BOPIS strategies. Even in a post-pandemic environment, BOPIS will thrive as a time-saving tool for busy consumers.
3. Brick-and-mortar stores will continue to be important distribution nodes in the omnichannel experience.
Neither e-commerce nor brick-and-mortar exists in a vacuum. E-commerce is growing and is expected to reach 23.6% of total retail sales in the United States by 2025, but brick-and-mortar sales were also on the rise in 2021. In-store retail spending was expected to grow 6.3% in 2021 to $5.149 trillion (the strongest growth rate seen since 2011), according to eMarketer. And we can only expect that growth to continue next year.
Consumers are increasingly using multiple sources — e-commerce, social media and brick-and-mortar stores — when making a single purchase decision. In its State of Retail report, the National Retail Federation notes, “Successful retailers are reimagining their offerings to meet consumers both online and in-store, creating an integrated experience that blends channels.”
According to Think With Google research, 70% of shoppers said the ability to buy a product from a physical store was important to them, while 74% of in-store buyers said that they searched online for something in-store-related first, such as the closest store near them, locations or what is in stock near them. Forty-six percent confirmed online that a product was in stock before going to the store.
Not only will retailers need to create a seamless shopping experience across channels, but they will also need to leverage all of their physical distribution channels — warehouses, distribution centers and storefronts — to optimize and streamline their fulfillment processes. A consumer may opt to pick up an order in-store and then return the item at a local pharmacy or other in-network location. By fully leveraging these channels operationally, retailers can offer greater convenience to consumers and take advantage of deeper efficiencies.
4. Sustainability practices will get the spotlight.
It’s up to retailers to help educate consumers on how their shopping choices can influence a transaction’s sustainability. Most consumers don’t know what will actually move the needle in terms of sustainability — or what the tradeoffs might be. It’s up to retailers to provide the right options and nudge them toward more sustainable choices.
Besides sourcing more eco-friendly materials and adopting better manufacturing practices, which is where many retailers are focused, there are many opportunities to make the post-purchase part of the transaction more sustainable. Slowing down and consolidating shipments where possible, decreasing the distance packages have to travel (including by leveraging stores as distribution nodes) and reducing the paper and packaging used for shipments and returns can all contribute significantly to both cost-efficiency and greening of operations.
Retailers have risen to the herculean challenge of making shopping safe and convenient throughout the pandemic; now it’s time to iterate on those processes and get ahead of customer demands.
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